Events at west African lender Ecobank over the past six months have been widely and rightly interpreted as an important test for the credibility of African bank governance and regulation. A combination of internal whistleblowing, regulatory pressure and shareholder activism did for former Chief Executive Officer (CEO) Thierry Tanoh and have prompted a fairly substantial overhaul of bank governance. All good news for African good governance.
But the bigger question for African banks like Ecobank is still unanswered. This is simply that as a cross-border African financial institution, Ecobank is evolving much faster than the institutions that supervise and regulate it. With operations in more than 30 sub-Saharan markets, Ecobank is a complex prospect for African bank supervisors and one that they are only just starting to get to grips with.
To be sure, the structure of Ecobank and its balance sheet gives regulators and politicians plenty to worry about. With Tanoh's problems, the Nigerian Securities and Executive Commissioner (SEC) was concerned that Ecobank was exporting operational risk from its western African hinterland into the Nigerian market. With more than 40 per cen of Ecobank's assets and deposits now in Nigeria, the SEC inevitably expects it prerogatives to carry serious weight in the bank.
However, smaller supervisors in markets like Ghana, Togo or Cote D'Ivoire see the large exposure to Nigeria as a risk in its own right. These markets might be individually small from the perspective of Ecobank's large balance sheet, but Ecobank provides probably a fifth or more of the formal lending in each of them. Their anxiety is not just about systemic risk, but the fear that Ecobank might chose to shrink these franchises in a future retrenchment, just as a number of European banks did in eastern Europe after 2009.
We probably won't ever know what story Tanoh told authorities in Togo and his native Cote D'Ivoire in mobilising them in defence of his leadership of Ecobank, but we can be pretty sure that he played on fears of an Ecobank increasingly dominated by the prerogatives of Nigerian regulators and South African institutional investors. In this respect, Ecobank's commitment to pan-African banking is not just a market play but a quasi-political one, and it raises expectations not just with the supervisors who oversee it but with the politicians who patronise it.
What the pan-African banking model now looks like will depend on African regulators' tolerance for risk and their capacity to supervise it. Like its few pan-African peers, Ecobank is largely deposit-funded and relatively lightly leveraged, which is generally healthy.
But sub-Saharan Africa's deposit base has exploded in size in the past decade and in markets like Nigeria and Ghana perhaps as many as half of depositors have had a bank account for five years or less. We don't know how depositors like these, in markets with low levels of institutional trust, react to apparent threats to their cash or savings, but we can guess. And if African regulators are guessing the same they will know how quickly a run on deposits in any of Ecobank's markets could start to pose an existential threat to all of them.
These generic risks are compounded by a specific weakness in regulatory frameworks. Most African regulators outside South Africa are still using a variant of the 1988 Basel I bank regulation framework. Rules and frameworks for cross border supervision are weak or poorly implemented. Areas like large intra-group exposures, which can be a key source of contagion, are opaque and the regulatory frameworks for the growing trading operations of some of these banks are still weak. African regulators are also chronically short on resources and skilled practitioners.
The big question for Ecobank, its customers, clients and owners over the next decade is how regulators will respond to this set of problems. Cross border frameworks for banks are particularly hard to build and sustain both practically and politically. A banking union on the European model is clearly unrealistic, although Ecobank's home jurisdiction the West African Monetary Union has pooled bank supervision as part of its currency union.
After years of struggling to make progress on integrating the south east Asian market for banking, Asean states have opted for a special form of supervision for a designated class of Asean cross-border bank under the new Asean Banking Integration Framework. This is a model that is likely to appeal to African supervisors. Indeed, there is already talk of a unique college of supervisors for Ecobank.
In the absence of these kinds of moves, the temptation for regulators will be to respond to the fear of contagion with stronger forms of subsidiarisation and tighter ring-fencing of capital and governance, especially if regulators like the Nigerian SEC feel the regulatory capacity gap with their peers is widening. This need not scupper the potential for cross-border banking in Africa but it would put a serious crimp in today's business models. Ultimately, it will depend on the balance between the sector's dynamism and collective supervisory nerve.
Enthusiasts for pan-African banking, and investors in sub-Saharan Africa in general, need to have a sober eye on this problem. A growing cross-border banking system in Africa is both an example and a facilitator of the kinds of scale business models that will transcend the fragmentation of the African market. But it is also a source of systemic risk and a test of regulatory capacity. Ecobank's marketing material proclaims that the future is Pan-African. At least for banking, the reality is likely to be a lot more complicated.
The writer is a partner at Global Counsel, a London consultancy.
FT Syndication Service
© 2026 - All Rights with The Financial Express
